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Victory or Repudiation? The Probability of the Southern Confederacy Winning the Civil War

Historians have long wondered whether the Southern Confederacy had a realistic chance at winning the American Civil War. We provide some quantitative evidence on this question by introducing a new methodology for estimating the probability of winning a civil war or revolution based on decisions in financial markets. Using a unique dataset of Confederate gold bonds in Amsterdam, we apply this methodology to estimate the probability of a Southern victory from the summer of 1863 until the end of the war. Our results suggest that European investors gave the Confederacy approximately a 42 percent chance of victory prior to the battle of Gettysburg/Vicksburg. News of the severity of the two rebel defeats led to a sell-off in Confederate bonds. By the end of 1863, the probability of a Southern victory fell to about 15 percent. Confederate victory prospects generally decreased for the remainder of the war. The analysis also suggests that McClellan's possible election as U.S. President on a peace party platform as well as Confederate military victories in 1864 did little to reverse the market's assessment that the South would probably lose the Civil War.

Date posted: November 5, 2007

Suggested Citation

Weidenmier, Marc and Oosterlinck, Kim, Victory or Repudiation? The Probability of the Southern Confederacy Winning the Civil War (November 2007). NBER Working Paper No. w13567. Available at SSRN: http://ssrn.com/abstract=1027186

Contact Information

Marc D. Weidenmier (Contact Author)

Claremont Colleges - Robert Day School of Economics and Finance ( email )